Kimberly-Clark still pursuing health care spinoff

Mar. 13, 2014

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About Kimberly-Clark Health Care

K-C Health Care sells surgical and infection prevention products for the operating room and a portfolio of medical devices. Products are sold primarily under the Kimberly-Clark and ON-Q brand names. Sales: Net sales in 2012 were $1.6 billion Employees: More than 16,000 with a large majority located in low-cost manufacturing operations in Latin America and Asia. The Business unit headquarters are in Roswell, Ga.

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Executives at Kimberly-Clark say a spin-off of the company’s health care business could happen in the third quarter of this year.

The company announced in November that it was seeking a tax-free spin-off to create a standalone, publicly traded company with $1.6 billion in annual net sales of surgical products, infection prevention products and medical devices.

“Company management continues to analyze the potential spin-off and expects to seek approval from the board of directors in the second quarter of 2014,” the company released in February. “Kimberly-Clark continues to expect that the spin-off will be completed by the end of the third quarter of 2014.”

Neenah-based Robert Abernathy would become the chief executive officer of the new health care company if the spin-off occurs. Abernathy is currently K-C’s group president of Europe, global nonwovens and continuous improvement and sustainability.

“This move would allow K-C Health Care to optimize its performance and flexibility to pursue its own value-creation opportunities,” Thomas Falk, K-C’s chairman and chief executive officer, said in November. “A spin-off would allow us to further sharpen our focus on our consumer and K-C Professional brands.”

K-C Health Care sells surgical and infection prevention products for the operating room and has medical devices focused on pain management, respiratory and digestive health. It holds the top market position in several categories including sterilization wrap, face masks, surgical drapes and gowns, closed suction catheters, pain pumps and enteral feeding tubes.

A spin-off would have to come after meeting market and regulatory conditions later in 2014, the company said. It is seeking a tax-free distribution of 100 percent of the new company’s stock to K-C shareholders.

Seventy percent of the health care division’s $1.6 billion in sales in 2012 were in surgical and infection prevention, while 30 percent were in medical devices.

Wisconsin overall has seen a surge in medical device manufacturing in recent years, said Brendan Benner, spokesman for the Washington, D.C.-based Medical Device Manufacturers Association.

“Wisconsin is a success story in the medical device sector,” Benner said. “There are many reasons, but with companies like General Electric and K-C with a strong presence you get clusters that you see here, Boston and in Minnesota.”

Benner said growing exports also have helped the industry.

“Along with aeronautics and semiconductors, medical devices are a booming export for the United States,” Benner said. “A good stat for the industry is that 98 percent of the sector has companies with fewer than 500 employees, showing a strong startup culture that could produce the next GE or K-C.”